- Net sales up $2.5 million to $45.4
million
- Gift segment sales up $6.0 million to $22.7
million
- Net income up $2.0 million to $2.7
million
- First half net income up $3.6 million
- First half cash flow from operations up $17.7
million
- Signed new licensing agreements with Sperry® and Arnold
Palmer®
Tandy Brands Accessories, Inc. (Nasdaq:TBAC) today reported
financial results for its second quarter and six-month periods
ended December 31, 2011.
Net sales for the second quarter were $45.4 million, an increase
of $2.5 million versus the prior year second quarter. Gifts segment
net sales of $22.7 million increased by $6.0 million over the prior
year period due to increased holiday shipments as a result of
organic growth from the Company's totes® license
and new sales from the Eddie Bauer® license. Net
sales in the accessories segment were $22.7 million for the second
quarter, a decline of $3.5 million from fiscal 2011. The decline
reported in the Accessories segment net sales was a result of lower
sales in exited product categories and lower levels of
replenishment orders by the Company's largest customer.
"We are pleased to see our initiatives drive positive results,"
said Rod McGeachy, President and Chief Executive Officer of Tandy
Brands. "We delivered profitable growth and realized the benefits
from recent cost savings initiatives to improve our bottom
line."
Second quarter fiscal 2012 gross margin as a percentage of net
sales was 30.9 percent, compared to 33.2 percent in the second
quarter of fiscal 2011. Although accessories segment gross
margins improved, overall gross margins declined due to a higher
mix towards customer-direct shipments, higher customer deductions
for holiday markdowns, and increased sales to higher volume, lower
margin customers in the gift segment.
Total selling, general and administrative (SG&A) expense for
the fiscal 2012 second quarter improved by $2.3 million over the
prior year period. This 18 percent improvement was due to
savings initiatives in labor, facilities costs, and
professional services.
For the second quarter, the Company reported net income of $2.7
million, or $0.39 per diluted share, compared to net income of $0.7
million, or $0.10 per diluted share, in the prior year.
Six-Month Results
Net sales for the six-month period ended December 31, 2011 were
$72.2 million compared to net sales of $72.1 million reported in
the prior-year period. An increase in net sales of the gifts
segment was due to an increase in business under the
totes® license and new sales under the Eddie
Bauer® license. This was offset by the
planned exit from non-profitable product categories initiated at
the end of the prior fiscal year in the accessories segment.
Gross margin as a percentage of net sales was 32.1% in the first
half of fiscal 2012, down from 33.9% in the first half of fiscal
2011. The decline was due to a change in sales mix in the
gifts segment including a higher mix towards customer-direct
shipments, higher freight and material costs, and increased sales
to higher volume, lower margin customers.
Total SG&A expense for the six-month period decreased $5.0
million to $19.4 million in fiscal 2012 due to decreases in labor,
facilities costs, and professional services.
The Company reported net income of $1.7 million, or $0.23 per
diluted share, compared to a net loss of $2.0 million, or a loss of
$0.28 per diluted share, in the prior-year period.
Financial Position
Net cash provided by operating activities was $17.7 million
higher than the first half of fiscal 2011 due to a $3.8 million
improvement in adjusted EBITDA, faster collections on receivables,
lower inventory levels, and lower funding of accounts payable and
accrued expenses. Inventories were reduced by $5.7 million to
$32.7 million as of December 31, 2011, due to lower levels of
inventory carried during the current year. Accounts receivable
was reduced by $8.7 million to $16.4 million on flat net sales due
to faster collection of receivables with the Company's largest
customer.
As of December 31, 2011 the Company reported net working capital
of $25.1 million. Current liabilities of $29.0 million as of
December 31, 2011 decreased $6.4 million from December 31, 2010
primarily driven by a $6.2 million reduction in outstanding
debt.
"We are pleased by our improvement in cash flow from
operations," said McGeachy. "We will continue to focus on
accelerating our cash cycle and making prudent investment decisions
with our cash. We are performing well against our debt
covenants and successfully reducing overall debt. As of
February 9, 2012 our loan balance was $8.5 million compared to
$13.8 million during the same period a year ago."
New Licensing Agreements
In the third quarter of fiscal 2012, the Company signed new
licenses with Sperry Top-Sider® and Arnold Palmer
Enterprises (APE). Both of these licenses are expected to
impact results in the Company's accessories segment beginning in
calendar 2013.
Under the agreement with Sperry Top-Sider®,
Tandy Brands will have the rights to leverage its expertise in
belts, shoulder bags, and small leather goods for both men and
women. Sperry Top-Sider® products will be
distributed through premium department stores and specialty
retailers throughout the United States and Canada, Sperry
Top-Sider's own retail stores, and on sperrytopsider.com.
"We are excited to partner with Sperry Top-Sider, a brand
recognized as an icon of American style for more than 75 years with
distinct equities which we will leverage to develop a compelling
product offering," said McGeachy.
Under the agreement with APE, Tandy Brands will have the rights
to leverage its expertise in golf belts. Incremental
distribution is expected in green grass golf shops, off-course golf
specialty stores, department stores, corporate shops and e-commerce
shops.
"We are excited to be partnering with Arnold Palmer, one of the
most successful names in the game of golf. Arnold Palmer's
popularity is legendary and his name provides unquestioned
authenticity to our products," said McGeachy.
"It is a key strategic imperative that we build our branded
portfolio. The licenses we added last year (e.g.
Wolverine®, Bone Collector®,
Eddie Bauer®, and Haggar®)
delivered meaningful, profitable growth in fiscal
2012. Furthermore, the new licenses we added this year (e.g.
Miss Me®, The Sharper Image®,
Elie Tahari®, Sperry®, and Arnold
Palmer®) make our growth pipeline even
stronger. We expect all of these nationally recognized
consumer brands to increase future net sales, improve gross margin
percentage, reduce our customer concentration risk and improve our
mix of lower-margin private label business," said McGeachy.
Outlook
"Although diminishing, our customer concentration risk
remains. Nonetheless, we expect to see continued growth in our
gifts segment and from the new licenses we've added to our
portfolio," commented McGeachy.
"We are focused on restoring shareholder value through improving
operational efficiency, growing volume in our key product
categories, and adding new licenses to our portfolio," said
McGeachy.
About Tandy Brands
Tandy Brands is a leading designer and marketer of branded
men's, women's and children's accessories, including belts, gifts
and small leather goods. Merchandise is marketed under various
national as well as private brand names through all major retail
distribution channels.
Safe Harbor Language
Except for historical information contained herein, the
statements in this release are forward-looking and made pursuant to
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The Company has based these forward-looking
statements on its current expectations about future events,
estimates and projections about the industry in which it operates.
Forward-looking statements are not guarantees of future
performance. Actual results may differ materially from those
suggested by these forward-looking statements as a result of a
number of known and unknown risks and uncertainties that are
difficult to predict, including, without limitation, general
economic and business conditions, competition in the accessories
and gifts markets, acceptance of the Company's product offerings
and designs, issues relating to distribution, the termination or
non-renewal of any material licenses, the Company's ability to
maintain proper inventory levels, and a significant decrease in
business from or loss of any major customers or programs. Those and
other risks are more fully described in the Company's filings with
the Securities and Exchange Commission. The forward-looking
statements included in this release are made only as of the date
hereof. Except as required under federal securities laws and the
rules and regulations of the United States Securities and Exchange
Commission, the Company does not undertake, and specifically
declines, any obligation to update any of these statements or to
publicly announce the results of any revisions to any
forward-looking statements after the distribution of this release,
whether as a result of new information, future events, changes in
assumptions, or otherwise.
| Tandy Brands
Accessories, Inc. And Subsidiaries |
| Unaudited Consolidated
Balance Sheets |
| (in
thousands) |
| |
|
|
|
| |
December 31 |
June 30 |
December 31 |
| |
2011 |
2011 |
2010 |
| Assets |
|
|
|
| Current assets: |
|
|
| Cash and cash equivalents |
$ 994 |
$ 414 |
$ 330 |
| Restricted cash |
-- |
1,450 |
1,404 |
| Accounts receivable |
16,352 |
14,286 |
25,043 |
| Inventories |
32,715 |
28,945 |
38,381 |
| Other current assets |
3,992 |
8,073 |
3,132 |
| Total current assets |
54,053 |
53,168 |
68,290 |
| Property and equipment, net |
5,954 |
6,525 |
7,159 |
| Other assets: |
|
|
| Intangibles |
4,519 |
4,936 |
5,384 |
| Other assets |
937 |
790 |
764 |
| Total other assets |
5,456 |
5,726 |
6,148 |
| |
$ 65,463 |
$ 65,419 |
$81,597 |
| Liabilities And
Stockholders' Equity |
|
|
| Current liabilities: |
|
|
| Accounts payable |
$ 9,997 |
$ 8,145 |
$10,385 |
| Accrued compensation |
1,448 |
1,900 |
1,448 |
| Accrued expenses |
2,268 |
2,267 |
2,036 |
| Credit facility |
15,290 |
17,935 |
21,520 |
| Total current liabilities |
29,003 |
30,247 |
35,389 |
| Other liabilities |
4,257 |
4,243 |
4,005 |
| Stockholders' equity: |
|
|
| Preferred stock, $1.00 par value, 1,000
shares authorized, none issued |
-- |
-- |
-- |
| Common stock, $1.00 par
value, 10,000 shares authorized, 7,067 shares, |
| 7,075 shares and 6,972 shares issued and
outstanding, respectively |
7,067 |
7,075 |
6,972 |
| Additional paid-in capital |
34,129 |
34,119 |
34,235 |
| Accumulated deficit |
(10,667) |
(12,318) |
(809) |
| Other comprehensive income |
1,674 |
2,053 |
1,805 |
| Total stockholders' equity |
32,203 |
30,929 |
42,203 |
| |
$ 65,463 |
$ 65,419 |
$81,597 |
| |
|
| |
|
| Tandy Brands
Accessories, Inc. And Subsidiaries |
|
| Unaudited Consolidated
Statements Of Operations |
|
| (in thousands except
per share amounts) |
|
| |
|
|
|
|
|
| |
Three Months
Ended |
Six Months
Ended |
|
| |
December
31 |
December
31 |
|
| |
2011 |
2010 |
2011 |
2010 |
|
| Net sales |
$ 45,434 |
$ 42,887 |
$72,177 |
$ 72,135 |
|
| Cost of goods sold |
31,386 |
28,654 |
48,997 |
47,691 |
|
| Gross margin |
14,048 |
14,233 |
23,180 |
24,444 |
|
| Selling, general and administrative
expenses |
10,297 |
12,592 |
19,417 |
24,457 |
|
| Depreciation and amortization |
567 |
646 |
1,150 |
1,291 |
|
| Acquisition related costs |
-- |
20 |
-- |
50 |
|
| Total operating expenses |
10,864 |
13,258 |
20,567 |
25,798 |
|
| Operating income (loss) |
3,184 |
975 |
2,613 |
(1,354) |
|
| Interest expense |
(382) |
(285) |
(749) |
(471) |
|
| Other income (expense) |
27 |
112 |
(11) |
155 |
|
| Income (loss) before income
taxes |
2,829 |
802 |
1,853 |
(1,670) |
|
| Income tax expense |
103 |
81 |
202 |
297 |
|
| Net income (loss) |
$ 2,726 |
$ 721 |
$ 1,651 |
$ (1,967) |
|
| Income (loss) per common share |
$ 0.39 |
$ 0.10 |
$ 0.23 |
$ (0.28) |
|
| Income (loss) per common share assuming
dilution |
$ 0.39 |
$ 0.10 |
$ 0.23 |
$ (0.28) |
|
| Common shares outstanding |
7,064 |
6,970 |
7,072 |
6,970 |
|
| Common shares outstanding assuming
dilution |
7,076 |
7,095 |
7,087 |
6,970 |
|
| |
| Tandy Brands
Accessories, Inc. And Subsidiaries |
| Unaudited Consolidated
Statements Of Cash Flows |
| (in
thousands) |
| |
|
|
| |
Six Months
Ended |
| |
December
31 |
| |
2011 |
2010 |
| Cash flows provided (used) by
operating activities: |
| Net income (loss) |
$ 1,651 |
$ (1,967) |
| Adjustments to reconcile net
income (loss) to net |
| cash provided (used) by
operating activities: |
| Deferred income taxes |
71 |
16 |
| Doubtful accounts receivable
provision |
17 |
28 |
| Depreciation and amortization |
1,275 |
1,405 |
| Stock compensation expense |
25 |
21 |
| Amortization of debt costs |
141 |
34 |
| Other |
-- |
(114) |
| Changes in assets and
liabilities: |
|
| Accounts receivable |
(2,115) |
(6,409) |
| Inventories |
(3,969) |
(6,810) |
| Other assets |
3,698 |
3,526 |
| Accounts payable |
2,474 |
(3,433) |
| Accrued expenses |
(445) |
(1,146) |
| Net cash provided (used) by operating
activities |
2,823 |
(14,849) |
| Cash flows provided (used) by
investing activities: |
| Acquisition |
-- |
(245) |
| Purchases of property and equipment |
(363) |
(521) |
| Sales of property and equipment |
-- |
2,774 |
| Net cash provided (used) by investing
activities |
(363) |
2,008 |
| Cash flows provided (used) by
financing activities: |
| Change in cash overdrafts |
(592) |
258 |
| Change in restricted cash |
1,434 |
-- |
| Net note borrowings (repayments) |
(2,633) |
12,076 |
| Net cash provided (used) by financing
activities |
(1,791) |
12,334 |
| Effect of exchange-rate changes on cash and
cash equivalents |
(89) |
7 |
| Net increase (decrease) in cash and cash
equivalents |
580 |
(500) |
| Cash and cash equivalents beginning of
year |
414 |
830 |
| Cash and cash equivalents end of period |
$ 994 |
$ 330 |
| |
| Tandy Brands
Accessories, Inc. And Subsidiaries |
| Unaudited Non-GAAP
Disclosures |
| (in thousands except
per share amounts) |
| |
| Our adjusted EBITDA, a non-GAAP
measurement, is defined as net income (loss) before interest,
taxes, depreciation and amortization, and certain
acquisition-related and one-time items. Adjusted EBITDA is
presented because we believe it provides useful information about
our business activities and also is frequently used by securities
analysts, investors, and other interested parties in evaluating a
Company's performance. Not all companies utilize identical
calculations; therefore, our presentation of adjusted EBITDA may
not be comparable to other identically titled measures of other
companies. EBITDA and adjusted EBITDA have limitations as
analytical tools and should not be considered in isolation, or as
substitutes for analysis of our results of operations as reported
under U.S. generally accepted accounting principles
("GAAP"). The following table reconciles our GAAP net income
(loss) to the adjusted EBITDA disclosures. |
| |
Three Months
Ended |
Six Months
Ended |
| |
December
31 |
December
31 |
| |
2011 |
2010 |
2011 |
2010 |
| Net income (loss) |
$2,726 |
$721 |
$1,651 |
$(1,967) |
| Income taxes |
103 |
81 |
202 |
297 |
| Interest expense |
382 |
285 |
749 |
471 |
| Depreciation and amortization |
567 |
646 |
1,150 |
1,291 |
| Acquisition related costs |
-- |
20 |
-- |
50 |
| Other income (expense) |
(27) |
(112) |
11 |
(155) |
| Adjusted EBITDA (loss) |
$3,751 |
$1,641 |
$3,763 |
$ (13) |
| |
| |
| We have provided our adjusted net
income (loss) disclosure, a non-GAAP measurement, as we believe it
is important for our stakeholders to understand the impact of
certain items on our statements of operations. The following
table reconciles our GAAP net income (loss) to the adjusted net
income (loss) disclosure. |
| |
| |
Three Months
Ended |
Six Months
Ended |
| |
December
31 |
December
31 |
| |
2011 |
2010 |
2011 |
2010 |
| Net income (loss) |
$2,726 |
$721 |
$1,651 |
$(1,967) |
| Acquisition related costs |
-- |
20 |
-- |
50 |
| Write-off of unamortized debt costs |
-- |
-- |
98 |
-- |
| Adjusted net income (loss) |
$2,726 |
$741 |
$1,749 |
$(1,917) |
| Common shares outstanding assuming
dilution |
7,076 |
7,095 |
7,087 |
6,970 |
| Adjusted net income (loss) per common share
assuming dilution |
$0.39 |
$0.10 |
$0.25 |
$(0.28) |
CONTACT: Tandy Brands Accessories, Inc.
Rod McGeachy
President and Chief Executive Officer
214-519-5200
Investor Relations
Chuck Talley
Chief Accounting Officer
214-519-5200